_The Earliest National Debt.—History of Tontines.—Of the
Money Interest, its Origin, Extravagance, and Folly.—Royal
Exchange.—First Irredeemable Debt.—Tricks of the Brokers.—Jobbing
in East India Stock.—False Reports.—Importance of the English
Funds.—Picture of the Alley.—Systematic Jobbing of Sir Henry
Furnese, Medina, and Marlborough.—Thomas Guy, a Dealer in the
Alley._
The creation of a national debt has been attributed to the Dutch, but
is really due to the Venetians. The immediate treasury of the Doge
was exhausted; money was necessary; and the most eminent citizens of
that great republic were called upon to redeem the credit of their
country. A Chamber of Loans was established, the contributors were
made creditors, four per cent. was allowed as interest, and she,
“Who once held the gorgeous East in fee,
And was the safeguard of the West,”
resumed her credit, and increased her power.
So fruitful a source of wealth was not allowed to fall into
desuetude. The Florentine republic, experiencing a deficiency in
her revenue, established a mount, allowed five per cent. interest,
and, says Sir William Blackstone, these laid the foundation of our
national debt. The Dutch were not long following the example. When
the great persecution occurred, which forced the Spanish Jew—the
aristocracy of the chosen race—from the place of his nativity, he
brought with him to Holland the craft and the cunning of the people.
He taught the Dutch to create an artificial wealth; and the people of
that republic, by its aid, maintained an attitude of independence,
which rendered them so long the envy and the hatred of the proud
states which surrounded their territory. Their industry increased
with the claims upon them. They cultivated their country with renewed
perseverance; they brought the spices of the rich and barbarous East
to the shores of the cultivated and the civilized West; they opened
new sources of profit; their merchant-vessels covered the waters;
their navy was the boast of Europe; their army was the scourge of
the great Louis in the height of his pride and power. The markets of
Holland evinced a full activity; the towns of Holland increased in
importance; and the capital of Holland became the centre of European
money transactions, partly in consequence of the great bigotry which
banished the Jew from Spain.
When, therefore, the chief of that small yet powerful republic was
called to sit upon an English throne, he brought with him many of
those whose brains had contrived and whose cunning had contributed
to produce these great changes; and from his reign, whatever evils
may have arisen from a reckless waste of money, there commenced
that principle which, for a century and a half, has operated on the
fortunes of all Europe,—which proclaimed that, under every form
and phase of circumstance, in the darkest hour of gloom as in the
proudest moment of grandeur, the inviolable faith of England should
be preserved towards the public creditor. Up to this period, the
only national debt on which interest was acknowledged was that sum
which had been seized on in the Exchequer; and even these dividends
were irregularly paid. Many debts had been incurred by our earlier
kings, but all the promises and pledges which had been given for
their redemption were broken directly the money was gained; and it
remained, we repeat, for William, whatever his errors may have been,
to establish the principle, that faith to the public creditor must be
inviolate.
The reign of William was productive of all modes and methods of
borrowing. Short and long annuities, annuities for lives, tontines,
and lotteries, alike occupied his attention. The former are still in
existence, the two latter have fallen to decay. The lotteries have
been expunged from the statute-book, and their evils will be fully
developed at a fitting period; while to the brain of a Neapolitan,
and the city of Paris, William was indebted for the knowledge of the
tontine. Lorenzo Tonti, in the middle of the seventeenth century,
with the hope of making the people of France forget their discontents
in the excitement of gambling, suggested to Cardinal Mazarin the idea
of annuities, with the benefit to the survivors of those incomes
which fell by death. The idea was approved by the Cardinal and
allowed by the court. Parliament, however, refused to register the
decree, and the scheme failed. Tonti again endeavoured to establish
a society on this plan, and to build by its means a bridge over the
Seine; but the unfortunate inventor christened it Tontine, and not
a man in Paris would trust his money to a project with an Italian
title. A complete enthusiast, he allowed Paris no rest on his
favorite theme, and proposed to raise money for the benefit of the
clergy in the same way. The Assembly reported on the scheme, and
the report contained all that could flatter the projector’s vanity,
but refused a permission to act on it; and again it was abandoned.
The idea, however, which could not be carried out for the people,
which was refused for the benefit of the city, and not allowed for
the clergy, was claimed as a right for the crown; and in 1689, Louis
XIV. created the first tontine to meet his great expenses. From this
period they became frequent; and William was too determined to humble
the pride of his rival, not to avail himself of this among other
modes of raising funds.[1]
The moneyed interest—a title familiar to the reader of the present
day—was unknown until 1692. It was then arrogated by those who saw
the great advantage of entering into transactions in the funds
for the aid of government. The title claimed by them in pride was
employed by others in derision: and the purse-proud importance of men
grown suddenly rich was a common source of ridicule.
Wealth rapidly acquired has been invariably detrimental to the
manners and the morals of the nation, and in 1692 the rule was as
absolute as now. The moneyed interest, intoxicated by the possession
of wealth which their wildest dreams had never imagined, and incensed
by the cold contempt with which the landed interest treated them,
endeavoured to rival the latter in that magnificence which was one
characteristic of the landed families. Their carriages were radiant
with gold; their persons were radiant with gems; they married the
poorer branches of the nobility; they eagerly purchased the princely
mansions of the old aristocracy. The brush of Sir Godfrey Kneller,
and the chisel of Caius Cibber, were employed in perpetuating their
features. Their wealth was rarely grudged to humble the pride of a
Howard or a Cavendish; and the money gained by the father was spent
by the son in acquiring a distinction at the expense of decency. They
were seized upon by the satirist and the dramatist as a new object of
ridicule; and under various forms they have become a stage property.
The term which they had chosen to distinguish them became a word of
contempt; and the moneyed class was at once the envy and the laugh
of the town. Nor was it until that interest became a great and most
important one, that the term assumed its right meaning, or that the
moneyed contended with the landed interest on a more than equal
footing. The former have always clung to the house of Brunswick; the
latter have often used their exertions against it. In time, however,
the moneyed became a landed interest, and vied in taste as well as
magnificence with the proudest of England’s old nobility. Among these
was Sir Robert Clayton, director of the Bank, whose banqueting-room
was wainscoted with cedar, whose villa was the boast of the
Surrey hills, whose entertainments imitated those of kings, whose
judicious munificence made him the pride of that great city to the
representation of which he was called by acclamation. But there were
other and less reputable directors of the great Bank; and a pamphlet,
published shortly afterwards, drew public attention to acts which
either prove that morality in one commercial age is immorality in the
next, or that some of the governors of the corporation were wofully
deficient in the organ of conscientiousness.
In the Royal Exchange, erected for less speculative and more
mercantile pursuits, were the early transactions of the moneyed
interest in the funds carried on. In 1695, its walls resounded with
the din of new projects; nor could a more striking scene be conceived
than that presented in the area of this building. The grave Fleming
might be seen making a bargain with the earnest Venetian. The
representatives of firms from every civilized nation—the Frenchman
with his vivacious tones, the Spaniard with his dignified bearing,
the Italian with his melodious tongue—might be seen in all the
variety of national costume; and the flowing garb of the Turk, the
fur-trimmed coat of the Fleming, the long robe of the Venetian, the
short cloak of the Englishman, were sufficiently striking to attract
the eye of the painter to a scene so varied. There, too, the sober
manner of the citizen formed a strong contrast to the courtier, who
came to refill his empty purse: and there also, as now, might be seen
the broken-down merchant, pale, haggard, and threadbare, haunting the
scene of his former glory, passing his now valueless time among those
who scarcely acknowledged his presence, and, as he had probably dined
with Duke Humphrey, supped with Sir Thomas Gresham.
“Trampling the Bourse’s marble twice a day,
Though little coin thy purseless pockets line,
Yet with great company thou art taken up,
For often with Duke Humphrey dost thou dine,
And often with Sir Thomas Gresham sup.”
A new impulse had been given to trade, and the nation was beginning
to feel the effect of the Revolution. William had already tried his
power in the creation of a national debt: jobbing in the English
funds and East India Stock succeeded; and the Royal Exchange
became—what the Stock Exchange has been since 1700—the rendezvous of
those who, having money, hoped to increase it, and of that yet more
numerous and pretending class, who, having none themselves, try to
gain it from those who have.
The charter granted by William to the Corporation of the Bank of
England is the first instance of a debt bequeathed to posterity.
Annuities had hitherto been the mode of raising supplies; and the
day, therefore, which witnessed the establishment of the Bank is
worthy of notice, as being also the day on which William laid the
foundation of an irredeemable national debt.
It was soon found that the duties appropriated to the various
payments of interest and annuities were insufficient to meet the
claims. In 1697, the national debt amounted to twenty millions, and
the revenue was deficient five millions. The payment in consequence
grew uncertain, and the moneyed men of the day, watching the course
of events, made large sums out of the distresses of government. “The
citizen,” says an old writer on the subject, “began to decline trade
and turn usurer.”
To prevent this, a law was passed against the stock-brokers and
jobbers, which limits the number of the former, enacts some severe
regulations, and makes some severe remarks upon the entire body.
At this period the broker had a walk upon the Royal Exchange devoted
to the funds of the East India and other great corporations; and
many of the terms now in vogue among the initiated arose from their
dealings with the stock of the East India Company. Jobbing in the
great chartered corporations was thoroughly understood. Reports and
rumors were as plentiful then as now. No sooner was it known that
one of the fine vessels of the India Company, laden with gold and
jewels from the East, was on its way, than every method was had
recourse to. Men were employed to whisper of hurricanes which had
sunk the well-stored ship; of quicksands which had swallowed her
up; of war which had commenced when peace was unbroken; or of peace
being concluded when the factories were in the utmost danger. Nor
were the brains of the speculators less capable than now. If at the
present day a banker condescends to raise a railway bubble 50 per
cent., the broker of that day understood his craft sufficiently
to cause a variation in the price of East India Stock of 263 per
cent.; and complaints became frequent that the Royal Exchange was
perverted from its legitimate purpose, and that the jobbers—the term
was applied ignominiously—ought to be driven from a spot polluted by
their presence. Mines of gold, silver, and copper were so temptingly
promised, that the entire town pursued the deception. Tricks and
stratagems were plentiful; the wary made fortunes, and the unwary
were ruined.
In 1698, the dealers and jobbers in the funds and share market,
annoyed by the objections made to their remaining in the Royal
Exchange, and finding their numbers seriously increase, deemed it
advisable to go to ’Change Alley, as a large and unoccupied space,
where they might carry on their extensive operations.
“The centre of jobbing is in the kingdom of ’Change Alley and its
adjacencies,” said a pamphleteer a few years after. “The limits are
easily surrounded in about a minute and a half. Stepping out of
Jonathan’s into the Alley, you turn your face full south; moving on
a few paces, and then turning due east, you advance to Garraway’s;
from thence, going out at the other door, you go on still east into
Birchin Lane; and then, halting a little at the sword-blade bank, you
immediately face to the north, enter Cornhill, visit two or three
petty provinces there on your way to the west; and thus, having boxed
your compass, and sailed round the stock-jobbing globe, you turn into
Jonathan’s again.”
The English funds were assuming a greatness they have ever since
maintained. The Hebrew capitalist, who came over with William,
had increased the importance of the jobbers by joining them. The
English merchant—even at this early period—found that money might
be gained in the new operation; and ’Change Alley, so well known in
Parliamentary debates and the correspondence of the time as “the
Alley,” was for a century the centre of all dealings in the funds.
Here assembled the sharper and the saint; here jostled one another
the Jew and the Gentile; here met the courtier and the citizen; here
the calmness of the gainer contrasted with the despair of the loser;
and here might be seen the carriage of some minister, into which the
head of his broker was anxiously stretched to gain the intelligence
which was to raise or depress the market. In one corner might be
witnessed the anxious, eager countenance of the occasional gambler,
in strong contrast with the calm, cool demeanor of the man whose
trade it was to deceive. In another the Hebrew measured his craft
with that of the Quaker, and scarcely came off victorious in the
contest; while in one place, appropriated to him, stood the founder
of hospitals, impressing with eagerness upon his companion the
bargain he was about to make in seamen’s tickets.
It was soon felt practically that the air of England is cold and its
climate variable. The more respectable among the jobbers, therefore,
gathered beneath the walls of one of those coffee-houses which formed
so marked a feature of London life in the eighteenth century, until
the chance became a customary visit, and the coffee-house known as
Jonathan’s became the regular rendezvous of all the dealers in stock,
and consequently the scene of transactions as extensive as any the
world ever witnessed.
In 1701, the character of those who met in ’Change Alley was not
very enviable. It was said, and said truly, that they undermined,
impoverished, and destroyed all with whom they came in contact. “They
can ruin men silently,” says a writer of the period, with great
vehemence; “undermine and impoverish, fiddle them out of their money,
by the strange, unheard-of engines of interest, discount, transfers,
tallies, debentures, shares, projects, and the devil and all of
figures and hard names.”
Every thing which could inflate the hopes of the schemer was brought
into operation by the brokers. If shares were dull, they jobbed in
the funds, or tried exchequer bills; and if these failed, rather
than remain idle, they dealt in bank-notes at 40 per cent. discount.
These new modes of gambling seized upon the town with a violence
which sober citizens could scarcely understand. Their first impulse
was to laugh at the stories currently circulated of fortunes lost and
won; but when they saw men who were yesterday threadbare pass them
to-day in their carriages,—when they saw wealth, which it took their
plodding industry years of patient labor to acquire, won by others
in a few weeks,—unable to resist the temptation, the greatest of the
city merchants deserted their regular vocations and speculated in the
newly-produced stocks. “The poor English nation,” says a writer, “run
a madding after new inventions, whims, and projects; and this unhappy
ingredient my dear countrymen have in their temper,—they are violent,
and prosecute their projects eagerly.”
No sooner had the members of the jobbing community taken their
quarter in ’Change Alley, than the city of London was seized with
alarm, and tried to keep the brokers at the Royal Exchange. They
grew indignant at their deserting so time-honored a place, and bound
them in pains and penalties not to appear in ’Change Alley. Pocket,
however, triumphed over prerogative; brokers resorted where bargains
were plentiful; ’Change Alley grew famous throughout England; but
it was not till nearly a century and a quarter after its first
transaction, and a quarter of a century after ’Change Alley ceased to
exist as a sphere for the stock-jobbers, that the ancient and useless
provision not to assemble in ’Change Alley was expunged from the
broker’s bond.
Among those who employed their great fortunes in the manner alluded
to was Sir Henry Furnese, a Director of the Bank of England.
Throughout Holland, Flanders, France, and Germany, he maintained a
complete and perfect train of intelligence. The news of the many
battles fought at this period was received first by him, and the fall
of Namur added to his profits, owing to his early intelligence. On
another occasion he was presented by William with a diamond ring,
as a reward for some important information, and as a testimony of
this monarch’s esteem. But the temptation to deceive was too great,
even for this gentleman. He fabricated news; he insinuated false
intelligence; he was the originator of some of those plans which at
a later period were managed with so much effect by Rothschild. If
Sir Henry wished to buy, his brokers were ordered to look gloomy
and mysterious, hint at important news, and after a time sell. His
movements were closely watched; the contagion would spread; the
speculators grew alarmed; prices be lowered 4 or 5 per cent.,—for in
those days the loss of a battle might be the loss of a crown,—and Sir
Henry Furnese would reap the benefit by employing different brokers
to purchase as much as possible at the reduced price. Large profits
were thus made; but a demoralizing spirit was spread throughout the
Stock Exchange. Bankrupts and beggars sought the same pleasure in
which the millionnaire indulged, and often with similar success.
The wealthy Hebrew, Medina, accompanied Marlborough in all his
campaigns; administered to the avarice of the great captain by an
annuity of six thousand pounds per annum; repaid himself by expresses
containing intelligence of those great battles which fire the English
blood to hear them named; and Ramilies, Oudenarde, and Blenheim
administered as much to the purse of the Hebrew as they did to the
glory of England.
In the midst of these excitements arises a name which, to the
dwellers in London, is well known. Thomas Guy, the Bible contractor,
was a frequenter of ’Change Alley; and here, duly and daily, might be
seen that figure, which the gratitude of his fellow-men has rendered
familiar in the statue raised to his memory.
FOOTNOTES:
[1] The tontine is simply a loan raised on life-annuities. In
consideration of a certain amount paid by a certain number of
persons, government grants to each a life-annuity. As the annuitants
die, their shares are divided among the survivors, until the annuity
granted to the whole becomes centred in the longest liver; at his
death the transaction ceases.